Frustration with Yahoo's feckless board went into overdrive recently when the board began soliciting ideas, proposals, and offers from anyone who had them.

The whole process seemed designed to avoid solving Yahoo's fundamental problems and instead come up with a transaction--any transaction--to save face before the board rinsed their hands of the whole affair.

Yahoo doesn't need cash, so the issuance of new stock (and the dilution of current shareholders) seemed absurd. What Yahoo needs is great leadership, not financial engineering.

Jerry Yang is a great guy, but he has already had his crack at running the company, and it went badly.

But now, after talking to people familiar with the details of the Silver Lake proposal and Yahoo's other options, I understand the situation better. And the Silver Lake plan actually appears to be the best option Yahoo has. (Details below).

For one thing, Yahoo's other options aren't exactly appealing. They appear to be threefold:

China eCommerce giant Alibaba, who wants Yahoo's Asian assets, is rumored to be "preparing" a bid for the whole company at ~$20 a share, with the help of private-equity firms Blackstone and Bain. This sounds simple, but it also seems highly unlikely to actually be a good option. For one thing, Alibaba has now had months to "prepare" this bid and it hasn't made it yet. This suggests that the bid may never actually materialize. (Raising ~$25 billion of cash in today's economy would be no mean feat.) And even if the cash can be raised, it's not clear that the deal would or could actually ever get done. We're heading into an election year, and China fears and resentment are already running high. The idea that regulators would just rubber-stamp the sale of a major American corporation to a Chinese rival seems like wishful thinking, which means that the deal would likely be tied up forever. And, in the meantime, Yahoo's core business would likely disintegrate.

More of the status quo. Yahoo's board has given up, the company is in purgatory, and the competitive position of the core business grows weaker by the day. The idea of doing "more of the same" at this point, therefore, is highly unappealing.

So that leaves the Silver Lake proposal, which actually has a lot to be said for it, especially relative to the alternatives.

The Silver Lake deal, it turns out, is NOT a clever way for Jerry Yang to retake control of the company. In fact, although Jerry would remain a shareholder and board member, his control and influence would be diminished. The current board--the root of Yahoo's problem--would basically get canned. And the dilution caused by the issuance of new stock at the current stock price would be offset by a dividend or buyback program, so the transaction would not be such a punch in the face to current shareholders.

According to a person familiar with the details. there are six parts to the Silver Lake proposal:

A "PIPE" (private investment in public equity) transaction that would include Silver Lake and Andreessen Horowitz buying $3 billion of newly issued preferred stock in Yahoo at $16.60 a share and then raising an additional ~$3 billion in debt financing from banks and Microsoft. The cash injection, in other words, would total about $6 billion.

The distribution of some or all of this cash to current Yahoo shareholders in the form of a dividend or a stock buyback. The latter would offset the dilution from the preferred stock issuance.

A plan for Yahoo's Asian assets that would allow the company to "unlock" their value. This plan would involve the cooperation of Alibaba, which Silver Lake has invested in and has been working with for months.

A plan for recruiting the right CEO to fix Yahoo's core business. A specific CEO has not been tapped, but Silver Lake presumably has some names in mind. The new CEO would not be either Marc Andreessen or former OpenTable CEO Jeff Jordan. Neither of these two would take any operating or executive role at the company.

A completely restructured board of directors. This is the key. As part of the proposal, Silver Lake would appoint three new board members, one of which would be Marc Andreessen. The new board would also include 5-6 independent directors, which might or might not include some current board members. (The details by which these board members would be selected and approved are not yet clear. Presumably they would be mutually-agreed upon by the current board and Silver Lake.) Yahoo founder and former CEO Jerry Yang would stay on the board, with Silver Lake's blessing, but he would not control it.

A general strategic plan to fix Yahoo's core business. This plan does not call for a radical transformation of the company. Rather, it involves focusing the business, streamlining decision-making, and generally just helping the company execute better. The details of this plan would obviously be worked out with the company's new CEO.

Now, the idea that Yahoo would issue $3 billion of new preferred stock at $16.60 a share when it doesn't know what to do with the cash it already has is, understandably, deeply unappealing. A more palatable alternative would be to have Silver Lake buy $3 billion of common stock in the open market and accumulate its 20% stake that way.

But Silver Lake's not about to do that.

Preferred stock has a major advantage over common stock in a situation like this, which is that its downside risk is limited. If Yahoo ever gets liquidated, Silver Lake will get all its money back before common stockholders see a penny.

That said, beggars can't be particularly choosy, and, by telling the world that it has no idea what to do next, Yahoo's board has put the company in a position in which it has few appealing options.

The best route out of the morass, of course, would be to hire an amazing CEO and have him or her re-focus and rebuild the company.

But Yahoo's board has already taken three swings at hiring this great CEO in the past decade, and they've whiffed every time.

So there's no reason to think they'd get it right this time. (What the board would almost certainly do, meanwhile, is take months and months to come to a decision, during which time Yahoo would continue to deteriorate).

Another route out, which will happen if Yahoo's board does nothing, is a shareholder proxy fight. Dan Loeb's Third Point has taken a 5% stake in the company, and, absent a transaction, the firm will almost certainly try to get the board fired. But this, too, will take time, and there's no guarantee that Loeb will be successful.

The TPG offer seems vague. Without a concrete plan to fix the company, it could also leave Yahoo's shareholders with significant dilution and nothing to show for it.

And the Alibaba takeover offer, as yet, seems like little more than an idea.

So it's actually not surprising that the board is "leaning toward" the Silver Lake proposal.

Hopefully they can extract another or dollar or two per share to minimize the dilution (and that's probably why we're hearing a lot about the TPG offer and the Alibaba possibility--to encourage Silver Lake to sweeten the deal).

But at this point, having screwed things up so badly, the Silver Lake proposal may well be the best option the board has.

The good news is, if the plan goes well, it could actually end up being an excellent move for Yahoo and Yahoo's shareholders.

DISCLOSURE: I work for Yahoo (as a host of Yahoo Finance). I am a Yahoo shareholder (since 1998--oof).I know tons of people at Yahoo and on Yahoo's board. I know lots of Yahoo investors, many of whom I like personally. I know Marc Andreessen, Reid Hoffman, and many of the other players in this drama, and I like them personally. Marc's an investor in Business Insider, which I greatly appreciate. Yahoo and Business Insider have a syndication partnership, which I am thrilled about. Yahoo's bankers, Allen & Co, are investors in Business Insider, and I like them personally and don't like to do things that make them not like me. I have relationships with dozens of other folks that might create conflicts of one sort or another when I write about this topic. So, basically, I'm conflicted out the wazoo.